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5Capitals: A Tool for Assessing the Poverty Impacts of Value Chain Development

Author(s): 
Jason Donovan
Dietmar Stoian
Institutional Sponsor: 
Tropical Agricultural Research and Higher Education Center
Ford Foundation
Publication date: 
Sunday, July 1, 2012

5Capitals in a nutshell

What is it good for?

5Capitals facilitates learning about the potential of value chain development (VCD) to strengthen rural livelihoods and improve business performance. Learning is derived from measuring and observing changes in various assets managed by smallholder households and the enterprises with which they have direct contact. These smallholder-linked enterprises play a critical role in linking smallholders to markets. Underpinning 5Capitals is the belief that the greater a household’s access to livelihood assets, such as human, social, natural, physical
and financial capitals, the higher its well-being and resilience. Likewise, the greater a linked enterprise’s access to business assets, including human, social, physical and financial capitals, the greater its economic viability and performance. The tool helps users understand critical development issues, such as the extent to which preexisting asset endowments determine the outcomes of VCD, the relationship between asset building at the enterprise and household levels, and the role of market, political and institutional factors in facilitating or hindering favorable outcomes. The methodological framework underlying 5Capitals helps users separate the changes caused by interactions and interventions in value chains from those induced by the overall context.

Who is it for?

5Capitals aims to support the following types of organizations involved in VCD:

  • Funding agencies looking for more effective and efficient programs to reduce rural poverty through VCD
  • NGOs, consultants, government agencies and other organizations providing services to smallholders and businesses that want to deliver more impactful VCD interventions
  • Businesses engaged with smallholders that want to determine their contribution to poverty reduction and improve their social and environmental credentials
  • Certification bodies that seek to understand the contribution of voluntary standard systems to building more resilient smallholder production and livelihood systems

What are its salient features?

5Capitals stimulates learning among stakeholders and facilitates continuous improvement toward higher-impact interactions and interventions in value chains through the following:

  • An asset-based approach that considers changes in livelihood and business assets resulting from VCD, which in turn provide important insights into advances in poverty reduction and improved business performance
  • Impact pathways that provide a practical framework for selecting indicators and developing a theory of change related to asset building by smallholders and their enterprises
  • Multiscale and multidimensional analysis that considers the effects of multiple-source interventions on asset building at household and enterprise levels
  • Field-tested and validated methodological framework that incorporates lessons learned from 23 case studies from Africa, Asia, Latin America and North America
  • Focus on organizational learning that involves VCD stakeholders throughout the process and uses the findings to redesign VCD initiatives and reallocate resources accordingly